Information Structure and the Tragedy of the Commons in Resource Extraction

Synopsis This paper considers the well-known Levhari-Mirman discrete-time model of resource extraction, and investigates the effects of the information structure of the dynamic game – open-loop, Markovian or history-dependent – on the equilibrium consumption path and the overall utility of the agents. Due to the special structure of the model, the open-loop regime yields a Pareto-optimal outcome. The Markovian regime leads to the most pronounced version of the tragedy of the commons. History-dependent behavior yields an outcome set that is intermediate between the other two cases, and that may include the Pareto-optimal outcome in some cases. The level of efficiency of equilibrium behaviour is thus U-shaped as a function of the level of information the agents’ extraction strategies are based on. The analysis suggests that in environments characterized by a dynamic (and no market) externality, forcing agents to commit to open-loop behavior would constitute welfare-improving regulation.     

Hotel workers’ substance use and abuse

This study investigates the usage of tobacco, alcohol, and cannabis among hotel employees in the resort city of Eilat. Data obtained from a sample of 458 respondents, drawn from three hotel chains, provides evidence of workers’ substance consumption in light of their socio-demographic backgrounds and specific job characteristics. The results indicate a higher rate of substance use among study participants in comparison to the average in Israeli society. Substance use was found to be the most prevalent among young, single male employees with relatively low levels of education. In terms of job characteristics, front-of-the-house employees were more prone to binge drinking than back-of-the house employees. It is suggested that work-related programs and policies, such as sensible drinking workshops and smoking cessation programs, may help prevent alcohol misuse and reduce extensive substance use among hotel staff.     

Dividend Changes and Future Profitability

We investigate the relation between dividend changes and future profitability, measured in terms of either future earnings or future abnormal earnings. Supporting "the information content of dividends hypothesis," we find that dividend changes provide information about the level of profitability in subsequent years, incremental to market and accounting data. We also document that dividend changes are positively related to earnings changes in each of the two years after the dividend change.     

The Suburbanization of Industry and Its Effects Upon Labor Force Participation Rates of Suburban Women

Post-World War II intrametropolitan dispersion of industry has been well documented in the literature on contemporary suburbanization. There has, however, been no empirical research conducted to determine the effect of the restructured metropolitan economy upon labor force participation rates of suburban residents, especially of suburban married women. The purpose of this study is to fill this research gap. The hypothesis tested is that increased employment opportunities in the suburbs will increase labor force participation of suburban married women, ceteris paribus . The research results show the hypothesized relationship to be correct. The variable developed in this study and used as a proxy for the degree of intrametropolitan industrial dispersion is statistically significant, albeit a bit weak, in explaining intersuburban variation in labor force participation rates of married women, husband present. Other variables (such as median school years completed) included in more traditional non-spatially oriented labor force behavior models are statistically insignificant in explaining areal variation in participation rates. The findings point up the necessity of recognizing the spatial complexities of the urban economy.     

Emporiophobia (Fear of Markets): Cooperation or Competition?

Widespread emporiophobia (fear of markets) has important policy implications, since it leads voters to demand anti‐market policies. There are many reasons for this anti‐market attitude; however, economists could reduce emporiophobia if we stressed cooperation rather than competition in writings and policy discussions. In a sample of introductory textbooks, competition is mentioned on average eight times as often as cooperation. The fundamental economic unit is the transaction, and transactions are cooperative. The benefit of a market economy—increased consumer surplus—comes from cooperation through transactions, not from competition. Competition in a market economy is competition for the right to cooperate. Competition is important because it guarantees that the best cooperators will win and because it establishes the efficient terms for cooperation, but cooperation is fundamental. For most people, competition has negative connotations since it focuses on losers, while cooperation implies a win–win situation. Other implications involve the morality of the market, “giving back,” and characteristics of market failures.     

Comparing different explanations of the volatility trend

We analyze the puzzling behavior of the volatility of individual stock returns over the past few decades. The literature has provided many different explanations to the trend in volatility and this paper tests the viability of the different explanations. Virtually all current theoretical arguments that are provided for the trend in the average level of volatility over time lend themselves to explanations about the difference in volatility levels between firms in the cross-section. We therefore focus separately on the cross-sectional and time-series explanatory power of the different proxies. We fail to find a proxy that is able to explain both dimensions well. In particular, we find that Cao et al. [Cao, C., Simin, T.T., Zhao, J., 2008. Can growth options explain the trend in idiosyncratic risk? Review of Financial Studies 21, 2599-2633] market-to-book ratio tracks average volatility levels well, but has no cross-sectional explanatory power. On the other hand, the low-price proxy suggested by Brandt et al. [Brandt, M.W., Brav, A., Graham, J.R., Kumar, A., 2010. The idiosyncratic volatility puzzle: time trend or speculative episodes. Review of Financial Studies 23, 863-899] has much cross-sectional explanatory power, but has virtually no time-series explanatory power. We also find that the different proxies do not explain the trend in volatility in the period prior to 1995 (R-squared of virtually zero), but explain rather well the trend in volatility at the turn of the Millennium (1995-2005).